Unit 8 Flashcards
Ansoff Matrix
- strategic planning tool used to plan future growth strategies.
1. market penetration - least riskiest (same market + product)
2. product development - (new product, same market)
3. market development - (new market, same product)
4. diversification - most riskiest - (new product + market)
market penetration
- existing market + product = least riskiest
- may be achieved via marketing - increasing advertising
Mcdonalds
product development
- developing a new product in the same market
example: organic Coca Cola
market development
- growth via expansion ~ selling existing product to new market
this may be via new distribution channels e.g. e-commerce, stores etc
or selling to international markets
Examples: Mcdonalds , starbucks in china
diversification
- producing a new product in a new market - most riskiest & most expensive.
- requires R&D and market research
Examples: Mcdonalds hotel,
Porters 5 forces
- threat of new entrants
- bargaining power of suppliers
- bargaining power of consumers
- degree of rivalry
- threat of substitute products
Threat of new entrants
- how difficult it is to enter a market
Barriers to entry: - Economies of scale - low unit costs
- cost of entry
- product differentiation
bargaining power of suppliers
bargaining power of consumers
- price/ income elasticity of demand gives consumers more power
degree of rivalry
threat of substitutes
porters generic strategies
- used to find a way to achieve sustainable competitive advantage over other competing products & firms in a market.
- cost leadership - lowest cost in a mass market
- differentiation - unique brand/product etc in a mass market
Stuck in the middle - multiple strategies but not achieving any of them
- cost focus - being the cheapest provider in a niche market
- differentiation focus - most unique in a niche market
Cost leadership - competitive advantage
- MASS MARKET
Achieved thru:
- economies of scale
- low cost production facilities
- employing tight cost control methods
- selling basic products that solves the problem
Examples: Walmart, Southwest, Amazon, Ryanair
- all businesses that are very profitable and operate at the lowest cost in their market.
Differentiation - competitive advantage
MASS MARKET
- achieved thru:
-unique product features/ branding/ designs
- higher quality
- higher customer service levels
~ these are usually priced higher than their competitors.
Examples: Louis Vuitton, Apple, Lego, Harley - Davidson.
Stuck in the middle
- pursuing multiple strategies but failing to achieve any of them.
Examples: Sony - Tv’s are not cheaper nor any uniquer in comparison to other brands.
cost focus
- niche market
- set out to become the lowest cost producer for a specific niche within an industry
- only difference btwn this and leadership is that this focuses on niche markets within an industry excluding the other segments.
Example: Monster Energy drinks, SanDisk, NetJets
differentiation focus
- niche market
- most unique and desirable provider for a specific niche within an industry
- the only difference btwn this and differentiation is that this focuses on narrower slice of industry excluding other segments
Examples: the whole foods market - niche market that focuses on selling organic and natural produce at higher prices which customers are willing to pay for.
organic growth
internal growth (growth within the business)
- e.g. increasing product range, opening new stores, new locations - franchising
- ansoff’s matrix
- slower growth
inorganic growth
external growth - outside of the business but within the industry.
e.g. mergers x takeovers (acquisitions)
- faster growth
reasons for taking over a business
- larger customer base = grow quicker
- combined expertise + new skills
- growing brand image w out having to establish it yourself
- increase market share, revenue global + domestic expansion
- eliminate competition + secure better distribution
reasons for takeovers failing
- lack of research + knowledge of new market = taking over a business in a market that they’re not familiar with
- higher costs + poor communication
- lack of decisive management + loss of key personnel
- incompatibility of management styles, structure + culture
- upset customers + suppliers
- resistance of employees to the change, change of management etc
horizontal integration
- the coming together of two firms in the same industry and the same market
examples: EE & Three, Volkswagen x Skoda
pros and cons of horizontal integration
pros:
- reduces the amount of competition in the market
- increases businesses market share + customer base
- take advantage of internal economies of scale
- buying existing brand is cheaper than developing own brand = can make entry barriers higher for rivals
forward x backward vertical integration
forward - taking over distribution channels e.g. buying out manufactures or stores that sell your product
examples: brewery’s buy out pubs to sell their drinks in
backwards - taking over suppliers in supply chain e.g. Birdseye have bought farms that produce their ingredients - farmers pay them rent
examples of businesses that own their supply chain = Shell, BP
pros x cons of vertical integration
+ creates barriers to entry = easier access to raw materials compared to rivals who may have to pay more
+ control of supply chain = reduces unit cost & improves quality of products
+ better control of distribution = can add channels to improve revenue
conglomerates
when a business takes over a business that does not operate in the same market/ product area e.g. Unilever owns Ben & Jerry’s ice cream, Lipton tea and offers household items
oligopoly
- a market where there are a few dominant firms
e.g. the car market, tech/ phone market
economies of scale - internal
internal:
- purchasing = bulk buying which leads to discounted products = cheaper
- technical = purchasing latest technology to improve productivity and efficiency
- managerial = hiring managers that prioritise cost cutting and boosting efficiency
- marketing = spreading marketing spend over larger range of products
- network = adding customers + users to already established networks e.g. phones
- financial = larger firms benefit from access to more + cheaper finance
economies of scale - external
external (all competitors benefit)
- infrastructure/ geographic areas :
e.g. creative media in London
examples:
- having specialist supplies close by
- access to research + dev facilities
- pool of skilled labour to choose from
diseconomies of scale
(rising unit costs)
-issues w communication + lack of synergy = reduces productivity leading to higher costs ~ often linked to managerial diseconomies of scale
- control - problems w monitoring quality + productivity, increasing wastage of resources
- co operation - workers in larger firms may develop sense of alienation + loss of morale
joint ventures
- 2 businesses joining together in certain areas as a separate business entity
example: L’Oreal, Hotel Shilla + Anchor equity partners came together to launch new luxury cosmetic brand “shihyo” - Korean cosmetic brand
